In recent days, the news of “a family of seven cashing out 2 billion, selling the company to 170,000 shareholders” has gained significant attention. Following this revelation, the stock price of Hongbo Group fell by 6.51% on the 20th of June. On the 21st of June, the stock price of Hongbo Group continued its downward trend from the previous day, with a decrease of 3.65% up to the present moment.
The focus of recent attention has been on the report that Hongbo Group, a listed company, has its top ten shareholders holding a combined equity ratio of only 5.8%. Notably, there is no single shareholder holding over 2% of the shares. During the initial public offering (IPO), the top ten shareholders collectively held over 74% of the shares, with the You family, consisting of seven individuals, owning 70% of the shares, effectively representing absolute control, making board meetings and shareholder meetings akin to family gatherings. Over time, the You family gradually sold off all their equity.
It has been pointed out by First Financial that the current combined equity ratio of the top ten shareholders of Hongbo Group is less than 8%, with not a single shareholder holding over 2% of the shares. In contrast, during the IPO in 2008, the top ten shareholders, especially the You family shareholders like You Yuxian and You Lijuan along with their spouses, collectively held over 74% of the shares.
However, following the listing, the You family, led by You Yuxian, continued to reduce their holdings of Hongbo Group stocks over multiple occasions between 2012 and 2019, citing reasons such as personal financial requirements or funds needed for real business investments and upgrading development.
Of note is the significant equity transaction that occurred with the You family transferring their holdings to Henan Yutai Holding Co., Ltd. and Henan Huiyi Trading Co., Ltd. after May 2019. This series of reductions and large-scale equity transfers have raised questions from the public about the You family “cashing out 2 billion”.
Regarding the equity transfers, Hongbo Group responded on June 20, stating that it was a voluntary and business consideration by both parties, and not as perceived by the public as “cashing out”. In response to the multiple rounds of reductions by the You family, the company stated that according to the latest shareholder list, there was no information found regarding any “You family” members holding company stocks.
After multiple rounds of equity transfers, on December 29, 2020, Hongbo Group disclosed an announcement titled “Announcement on the Transfer of Part of the Company’s Shares by the Actual Controlling Shareholder Agreement”. As of the date of the announcement, Huiyi Trading directly held 8.03% of the total share capital of the listed company, while Yutai Holdings held 14.30% of the total share capital of the listed company. Mao Wei, the actual controller of the two aforementioned companies, became the controlling shareholder and actual controller of Hongbo Group, signaling the formal stepping down of the “You family” who had served as the actual controllers for over 10 years since the listing.
Shortly after Mao Wei became the actual controller of Hongbo Group, his controlling equity was pledged, and subsequently, due to legal disputes, the equity of Huiyi Trading and Yutai Holdings controlled by Mao Wei was frozen by the judiciary. This raised suspicions from the public, questioning if Mao Wei’s equity was mainly frozen during this period, indicating a profit-making scheme by borrowing money here and using equity as collateral there, bypassing various constraints on reducing holdings, which could be seen as ideal.
However, Hongbo Group stated that Mao Wei’s equity was passively frozen by the judiciary due to his personal debt issues. Furthermore, the judiciary freeze did not occur during the period when his equity was pledged, and upon the company’s investigation, the previous actual controller did not profit from it, dismissing the false assertions by the public misleading investors.
Regarding the controversy surrounding Mao Wei’s equity operations, it was found through announcements that after Mao Wei took over as the actual controller of Hongbo Group, he repeatedly circulated a portion of the Hongbo Group shares held by Henan Yutai through a process of “pledging – releasing the pledge – re-pledging”, with most pledgees being individuals. Additionally, Mao Wei also pledged all 40 million shares of Hongbo Group held by Huiyi Trading.
On February 17, 2023, the latest disclosure [refer to announcement title] shows that Henan Yutai and Huiyi Trading pledged 3.5 million shares and 1.3 million shares respectively for “capital requirements”. As of the disclosure date, the pledging procedures had been completed.
However, timelines indicate that the judicial freezing of the Hongbo Group shares held by Henan Yutai and Huiyi Trading started in January 2024, which did not align with the latest disclosed pledge made by Hongbo Group.
Following Mao Wei’s succession at Hongbo Group, a series of equity operations attracted public attention. The announcement revealed that just over two years after Mao Wei joined Hongbo Group, he started to transfer his company’s equity holdings. In April 2023, Mao Wei transferred 94.23% of Yutai Holdings to Li Xiaolin and 100% of Huiyi Trading to Yang Kai. However, both parties entrusted the voting rights of the shares to Mao Wei, consequently changing the company’s actual controllers to Mao Wei, Yang Kai, and Li Xiaolin. Subsequently, Mao Wei resigned from his position as the chairman of the company.
On February 28, 2023, Hongbo Group announced the company’s transition to a state without controlling shareholders or actual controllers.
In response to the issue of a dispersed equity structure, the latest data provided by Hongbo Group on June 20th shows that based on the current shareholder registry, the combined equity ratio of the company’s top ten shareholders is 7.15%, demonstrating a relatively low overall share ownership concentration.
This company, which started in lottery printing, has expanded into various industries in recent years. Since 2017, Hongbo Group has continuously attempted cross-border ventures, venturing into mobile games, 5G, blockchain, and robotic vacuum cleaner businesses.